Transcript of "Your+Retiremen +Jan+2006+Newsletter1"

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<ul><li>In This Issue: </li></ul><ul><li>New Year’s Resolutions That Will Help You to Build Your Nest Egg </li></ul><ul><li>What You Should Know: Do Employers Shortchange Workers On Retirement Plans? </li></ul><ul><li>Our Planning – Saving – Investing For Retirement Workshops </li></ul><ul><li>This Month’s Question: Why Do So Many Of Us Investors Invest In Actively Managed Mutual Funds </li></ul><ul><li>A Retirement Diary: How Benchmarking Can Help You </li></ul><ul><li>What’s Ahead: Can You Retire? The Numbers Will Tell You </li></ul><ul><li>How Can I: Know More About My Pension </li></ul><ul><li>Building Your Nest Egg: Are You Planning Or Stalling? </li></ul><ul><li>Sandy The Smart Saver: Alternative Investments? Be Careful!!!!! </li></ul><ul><li>Sandy Cartoon </li></ul><ul><li>Quick Take #1: Do Top Performing Mutual Funds Continue To Be Top Performing Mutual Funds </li></ul><ul><li>Quick Take #2: Take Your Social Security Benefits At 70? </li></ul><ul><li>Quick Take #3: Employer Provided Health Care Benefits In Retirement </li></ul><ul><li>Stock Market – Wall Street --- Investment Humor </li></ul><ul><li>Quotable Quotes </li></ul>Your Retirement Welcome to Your Retirement, our monthly web-newsletter with information that can help you with your retirement planning efforts. We provide straight-forward, easy to understand, unbiased and candid information. Feel free to use this information and to also pass it along to your friends and associates. You will find previous issues of our newsletter on our website. If you are interested in additional information that can help you, be sure to check out our web site; retirementplanningconsultants.com or contact Robert R. Julian, at rrj1@cornell.edu ® RETIREMENT PLANNING CONSULTANTS A Guide To Your Retirement Planning - Volume III - Number 1 New Year’s Resolutions That Will Help You To Build Your Nest Egg #1 Save: Too many workers don’t save enough or at all. Thirty percent of eligible employees do not participate in their 401(k). About 22% don’t even save enough to get the maximum company match. The average amount saved is 7.9% of salary. In 2006, you can do better. Live below your means. Avoid lavish spending and wasteful purchases. Start with saving 10% of your income. Set up your savings plan so that you will increase the percentage of income you save every time you get a raise. If you don’t save early and regularly, you will miss out on the benefit of many years of compounding and that, will have a significant impact of the size of your nest egg. Nothing invested, equals nothing compounded, equals nothing for retirement. Here’s a quick tip: let’s say that you are 25 and you put roughly $3,000 ($250 a month) in an IRA every year and with ten percent average returns. You can retire a millionaire at 65. A 45-year-old can do it by maxing out their 401(k) with $1,250 a month. Notice the explosive power: At 65, most of your million dollar retirement portfolio will be in the growth. For example, the 25-year-old will have invested only $120,000 over 40 years; the rest is compounded interest and appreciation. #2 Diversify: The experts all tell us that diversification is key when it comes to investing. Just because your company was smart enough to offer mutual funds in your 401(k), doesn't mean you should January 2006

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-2- load all your retirement money into one fund unless you are invested in an index fund like the S&P 500 Index or the Wilshire 5000 – Total Stock Market Index. #3 Don’t Overload On Company Stock: We know that many companies offer their own stock in the 401(k) plan. But Enron and employees of other companies that went out of business know that investing in your company stock can be a very dangerous choice. It is not an act of loyalty --- it's a bad choice. Just by being an employee of a particular company, much of your financial situation is invested in the company. If the company goes belly-up, it would be a shame for you to loose both your job and all your retirement savings. Most experts agree that it’s okay to hold some company stock (especially if you get it at a discount), but it should only be a small portion of your portfolio; no more than 10%. But, even with all the warnings, 13% of all 401(k) investors invest more than 80% of their assets in their company’s stock. #4 Seek To Become Average: This is a hard one to live up to because we’ve been told since birth --- who wants to be average. But, in the world of investing, being average (investing in index funds) means you are one of the best students in the class. In the world of stock market returns, an average investor who obtains the average beats most other 401(k) investors. Dalbar, a Boston based financial services firm, tells us that over a 20 year period, most 401(k) investors earned a meager 2.6% annual return. Compare that to a 3.1% inflation rate and a 12.2% from the S&P 500 Index over the exact same time period. The “average” index investor gained almost 10% more than most 401(k) investors. The study reveals that the behavior of too many investors is an obstacle to reaching the published performance of the financial markets in which they are invested. #5 Say “No” To Market Timing: How many times have you heard about a company or a mutual fund or an investment idea that has done well recently and considered buying it? Chasing the latest “hot investments&quot; after prices have escalated, is a big mistake. When you select an investment, most experts will tell you that a long-term track record is much more important than just a current hot pick. If you sell shares because you think the price will fall, you may be making another market-timing mistake. In order to sell before a market drop, you need to be correct not only about when the shares will fall, and then you also have to be correct as to when the shares will rebound so that you can reinvest. Few, if any, in- vestors are able to make one of those decisions correctly, and almost no one makes the right decision twice. In a study of 66,400 investors, behavioral finance experts Terry Odean and Brad Barber concluded: &quot;The more you trade the less you earn.” The most active traders averaged 11.4% returns while their portfolios turned over 258%. Buy-and-hold investors with 2% portfolio turnover enjoyed 18.5% returns. Market timers lose money due to higher taxes, expenses and transaction costs. Clearly, investor behavior can have a far more negative impact on investment performance than investors realize. #6 Simplify Your Investing: If you put all of your savings in the market as a whole, you will, over time, do better than 90% of all investors --- including the pros. One approach could be the Coffeehouse Portfolio, developed by Bill Schultheis, the author of The Coffeehouse Investor - How To Build Wealth, Ignore Wall Street, And Get On With Your Life . Bill wrote the book in an effort to bring a simple and more sophisticated investment philosophy to individuals. The Coffeehouse Portfolio utilizes a portfolio of seven no-load Vanguard Index Funds. They place 40 percent in the Total Bond Index (VBMFX) and 10 percent in each of six stock funds: The S&P 500 Index Fund VFINX); Large-Cap Value VIVAX); Small-Cap (NAESX); Small-Cap Value (VISVX); Total International Stock Index (VGTSX); and the REIT Index (VGSIX). What are the Coffeehouse Portfolio returns? (Annualized: 14 years: 11.08%. through 12/31/2004). How have your funds performed over the last 14 years? #7 Watch Out For Fees And Expenses: Every dollar that you pay in fees and expenses is a dollar that will not show up in your nest egg. Make sure that your mutual fund choices are no-load mutual funds, meaning they don't cost you a percentage to buy in and then pay to get out. You'll also want to make sure you are not being charged 12b-1 fees . Another place to look for hidden fees is the internal expenses of the fund, measured by the expense ratio. If you have the choice between two large growth funds, for example, and one charges 1.3% in internal expenses and one charges 0.3% in internal expenses, go with the latter. It is highly unlikely the first fund will beat the 2nd one by 1% a year to make up for its high costs, especially when it is in the same investment category. All these hidden fees should be spelled out in each fund's prospectus, but you can look online at Morningstar.com or Yahoo.com if you know the ticker symbol of the fund

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-3- (a five letter combination, usually ending with &quot;X&quot;). In particular, look for the lines labeled &quot;expense ratio,&quot; &quot;front-end sales load,&quot; &quot;back-end sales load,&quot; and &quot;12b-1 fee.&quot; There's no need to pay any of the loads, but the expense ratio is necessary, though it can be lower. # 8 Buy Into Quality Investments: CBS Marketwatch.com columnist Paul Farrell reminds us of a meaningful quote from legendary investor Warren Buffett. When Buffett was asked about his favorite holding period for an investment, he replied “Forever.” When asked the best time to sell, he replied “Never.” As Farrell and other experts add, there are exceptions to this rule; “But if you buy quality companies and index funds with proven long-term records, you won’t be tempted to sell when the market dips and talking heads on cable freak out.” The absolute most important decision you will make is the up-front buy decision --- and that is why you need to pick stocks and mutual funds based on the assumption you will never sell them. “ The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack of will.” Vince Lombardi 1913 – 1970, one of the most successful coaches in the history of American football . What You Should Know: Do Employers Shortchange Workers On Retirement Plans? Paul Merriman, author of Live It Up Without Outliving Your Money, and founder and president of Merriman Capital Management, a Registered Investment Advisory firm, tells us about a new survey of 20 major employers which indicates that m ajor Northwest employers are shortchanging their workers on retirement plans. These plans are harming the employees because of high costs and poor investment choices --- they do a poor job of giving their employees the investment options they need most. The survey covered the optional retirement plans of corporate employers including Starbucks, Nordstrom, Costco, Microsoft, Washington Mutual and Amazon.com as well as government employers including the University of Washington and the City of Seattle. The research and analysis was conducted by Merriman Capital Management. Tom Cock, research editor of 401kHelp.com, states, “Across the board, the analysis found that employers significantly shortchange plan participants by featuring unnecessarily expensive mutual funds and failing to give ready access to many important asset classes. Employers who offer broad fund choices typically do an inadequate job of helping participants choose the best options.” The site contains analysis of more than three dozen employer plans along with specific recommendations for the options employees should choose in each plan. Cock said that most plans are loaded with funds that concentrate on U.S. large-company growth stocks, which over the long term (and over the past five years) have performed relatively poorly for investors. Few plans give investors good choices of funds that invest in U.S. value stocks and U.S. small-company stocks. International fund offerings, when they’re available, are typically limited to large-company stocks. International small-company funds, which have outperformed most other asset classes lately and over long periods of the past, are rarely available to 401(k) participants. High recurring expenses are a common drawback of these plans. The equity funds in plans typically charge annual average expenses of 0.7 to 0.9 percent. Expenses in Amazon.com’s plan average 1.14 percent. That compares with average expenses of less than 0.27 percent in the readily available alternative funds recommended by Merriman Capital Management in the same asset classes. Cock recommends that employers offer low-cost retirement fund choices in at least eight equity asset classes: U.S. large blend, U.S. large value, U.S. small blend, U.S. small value, international large blend, international large value, international small blend and international small value. In addition, emerging markets funds, though rarely offered in 401(k) plans, give investors access to the high long-term growth potential in developing nations such as China. “ Over the past 20 years, employers of all types have gradually made employees more responsible for their own retirement investments through 401(k) and similar plans,” Cock said. “But employers are doing a poor job of giving workers the tools they need to exercise that responsibility well.” Cock recommends employees take an active role in persuading the trustees of their retirement plans to offer investment choices with lower expenses and more opportunities for diversification. The resources at 401kHelp.com include a letter that participants can use to request better options. At its free educational Web site, FundAdvice.com, Merriman Capital Management has posted a Model Portfolio of nine equity funds that do-it-yourself investors can use to gain low-cost access to the most important asset classes. Care to engage in an interesting exercise? Take a look at the mutual funds offered in Merriman’s Model Portfolio and then compare it to the funds offered in your 401(k) plan. Do you have low-cost access to the most important asset classes? If yes, great. If no, why not?

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-4- This Month’s Question: Why Do So Many Of Us Investors Invest in Actively Managed Mutual Funds? I am always on the lookout for information – research that can help the average investor with his/her investing efforts. One of the more interesting findings is that institutional investing such as pension funds place about 80% of all their money invested in index funds. Another piece of research told me that the state of Washington invests 100% of its stock market money in index funds. What are the percentages of other states? Califonia: 85%, Kentucky: 67%, Florida: 60%, New York: 75%, Connecticut: 84%. Bill Schultheis, in his book, The Coffeehouse Investor states that the people who invest this money are “some of the largest and most sophisticated investors in our country – the administrators of state pension funds. These people invest billions of dollars and have a fiduciary responsibility to do the right thing for the thousands of state employees who are counting on their state’s pension funds when they retire.” Another piece of research I have looked at indicated that 92% of us mutual fund investors place our money in actively managed mutual funds. Money invested in passive (index) stock funds comprises about 8% of money invested in all stock mutual funds. And the question I want to ask is ---why? Despite the increased popularity of passive investing, the percentage of money invested in passive funds is still small relative to the total amount of money invested in all stock mutual funds. The percentage is even smaller relative to the amount invested in all bond mutual funds. Even in 1998, when passive investing received particularly heavy media attention, just over 20% of net inflows went to passive funds and only 16% went to S&P 500 index funds. This means that nearly 80% of net inflows still went to active funds--much of which was invested in the stocks of the S&P 500. Schultheis also tells us that “Only 20 percent of all managed mutual funds beat the stock market average in each of the last three-, ten- and fifteen year periods.“ So, if only one-in-five (20%) of all managed mutual funds beat the index fund, what kind of damage does that do to your investment returns? DALBAR, Inc., conducted a well-known study called Quantitative Analysis of Investor Behavior. The study confirms investors’ poor timing and the resulting financial carnage. Investors buy funds immediately after a rapid price appreciation. This just happens to be right before investment performance starts to slacken. Prices fall soon after and the investors quickly dump their holdings to search for the next hot fund. The resulting returns fail to even beat inflation. When measured over the last nineteen years, the average equity investor earned a meager 2.6% annual return. Compare that to a 3.1% inflation rate and a 12.2% return from the S&P 500 over the exact same time period. Not only did investors fail to keep up with the market, they also lost money to inflation. So, the final question here is ----would you rather spend much, much time sorting through more than 8,000 actively managed funds and try to find the outstanding gem or two or would you rather spend that time looking at art in museums, playing more Our Planning – Saving – Investing For Retirement Workshops The Retirement Confidence Survey provides us with a look at some of the misconceptions that many individuals have about saving for retirement. Forty-six percent of all workers say they take a guess at calculating the savings they need for retirement. One-third of those who have done this exercise, do not remember the result of that calculation. More than half of all workers says they are behind schedule when it come to planning – saving for retirement. Of the workers who are confident they will have enough money for retirement, 38% have less than $50,000 in savings. More than half of workers expect to be eligible for full Social Security benefits before they actually will be. Two in 10 admit they do not know when they will be eligible. Eight percent describe their personal knowledge of investing or saving for retirement as less than comprehensive. Forty-three percent state they possess no better than limited knowledge. About half of workers who have not saved for retirement, are somewhat confident about having enough money for retirement. And these are issues that we address in our Planning Saving Investing For Retirement Workshops. Your retirement may be years away but planning for it shouldn’t be. Talk to the people in your benefits – compensation office about our workshops and ask them to get in touch with us so that we can bring our sessions to your workplace. If you’d like to see a brochure which details what we do in our three sessions, send us an email ---rrj1@cornell.edu Do not undervalue the headache. While it is at its sharpest it seems a bad investment, but when relief begins, the unexpired reminder is worth $4 a minute. Mark Twain, 1835 – 1910, American humorist, writer and lecturer “ Wealth comes from choices people make, not chances they take. Smart people don’t wait for luck to make them wealthy. Every day, they cultivate habits and follow rules that others don’t. If you want to be wealthy, live below your means. Pay yourself first and build wealth, not a lifestyle that saddles you with expenses. When you save and invest, make your money work hard for you.” Paul Merriman, FundAdvice.com

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-5- golf, reading books, listening to great music, watch the kids play soccer, catch up on movies that you missed???? Get the idea? “ The implication (of the Efficient Market Theory) for the investor is that it is almost impossible to “beat the market.” 12th Grade Economic Text Book A Retirement Diary: How Benchmarking Can Help You? Webster’s defines a “benchmark” as “a point of reference from which measurements may be made” or “something that serves as a standard by which others may be measured.” We've all heard the carpenter's adage &quot;measure twice, cut once&quot;. It means that acting without planning can be expensive, and because of the potential cost of poorly thought-out actions, we should not only plan, but plan twice. And that is why you should also plan - research your investments not only before you buy but also after the purchase. You should check up on how well your investments are doing. Whenever I teach my Planning – Saving – Investing For Retirement workshops, I spend a fair amount of time in explaining and also showing how you can use a standard to measure how well your mutual fund(s) are performing vs. a benchmark. Unfortunately, for way too many investors, my explanation is the first time they have heard of this system of measurement. Unfortunate because you as an investor may not be getting the best return on the funds you invest in. Once you purchase your fund, you just can’t forget about it. It’s essential to compare your returns to a benchmark to examine whether your investment strategy is working. It's easy to tell if your plan isn't performing well. At the very least, you should be earning close to the average returns of the stock and bond markets. How can you tell if your 401(k) funds are keeping up with a minimum standard of performance? Compare them to an appropriate benchmark or index fund. Let’s perform a quick benchmark check for you. Many employees choose to hold the Fidelity Magellan fund in their portfolio of investments. Let’s see how well it has performed against a market index. As you will note, the S&P 500 Index and the Total Stock Market Index funds have outperformed Fidelity Magellan over the past 1 and 3 and 10 year periods. But, since inception, Magellan has outperformed the S&P 500 index by over 6% per year. In the early days, Peter Lynch, the manager of Magellan ---some feel he is the greatest stock picker ever --- led Magellan and their returns enabled it, for many years, to be the largest (in terms of total assets) and most popular fund with investors. However, since he left the fund in 1990, the returns have been lackluster. In 1999, Magellan had $105.9 billion in assets. Back on November 1, 2005, Magellan had $53.7 billion --- a loss of almost 50%. Investors voted with their feet as they walked away from Magellan. Also opting out were Microsoft and Lowe’s --- their 401(k)s no longer offer Magellan as an investment option. Why don’t you benchmark your fund or funds against an index like the S&P 500 Index? Go to an internet site (vanguard.com, morningstar.com, money.cnn.com, Bloomberg.com, indexfunds.com) and do some comparison shopping --- see if your fund (s) can top the S&P 500 Index or The Total Market Index. “ Mutual funds may have avoided the scandals and blowups that hit hedge funds, but they can’t escape one scandalous truth: They ingest billions of dollars from investors in fees every year in return for performance that trails the S&P 500.” Inside Wall Street, Fortune Magazine, November 15, 2005 What’s Ahead: Can You Retire? The Numbers Will Tell You You are pretty sure you want to retire . But, are you sure that you can retire ? The challenge that you have is to determine whether you will have the reliable income you will need to finance your retirement. And the only way you can do that is to check the numbers. The problem is that you don’t want to underestimate the number of years your nest egg will have to last. As we have said so many times before --- you don’t want to run out of dollars before you run out of days. You have checked out a workable budget for your first year of retirement and you know the dollars you will need and they total up to $45,000. Let’s assume that Uncle Sam will electronically transfer $15,000 a year from Social Security to your account. That means that you will need $30,000 from other sources for the first year and your income will have to increase each year by the inflation rate. You do want to maintain your purchasing power. Walter Updegrave, columnist for CNNMoney tells us that in order “to support inflation-adjusted withdrawals

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- 6 - over a period of 30 to 40 years, I would say that, as a rule of thumb, you need a portfolio roughly 25 times the amount you withdraw that first year of retirement. So, in other words, if you needed $35,000 of inflation-adjusted income from your investments, you would need a portfolio of about $875,000. Actually, you'd need more since the earliest you could collect Social Security benefits would be 62. That's not to say you should start collecting at 62.” But, as Updegrave points out, this scenario is “just a rule of thumb. You can get a better sense of how long your portfolio might last at different levels of withdrawals by checking out T. Rowe Price's Retirement Income Calculator . For estimating Social Security benefits, you can check out one of the Social Security administration's benefit calculators. ” “ It is when the well runs dry that we know the price of water.” Benjamin Franklin 1706 – 1790, American publisher, journalist, author, philanthropist, abolitionist, public servant, statesman, , scientist, librarian, diplomat, poet, musician, philosopher, economist, and inventor How Can I : Know More About My Pension The Pension Rights Center (www.pensionrights.org) is a nonprofit advocacy group and is the country's only consumer organization dedicated solely to protecting and promoting the pension rights of American workers, retirees and their families. The Pension Benefit Guaranty Corporation (www.pbgc.gov) is a federal agency that insures organizations’ traditional defined benefit pension plan. It currently protects the pensions of 44.4 million American workers and retirees in 31,200 private single-employer and multiemployer defined benefit pension plans. Building Your Nest Egg: Are You Planning Or Stalling? We are seeing more surveys indicating that participants are not seeking advice and are not spending sufficient time making 401(k) decisions. A MetLife survey of full-time employees found that many plan participants, particularly single employees, made their benefits decisions without outside consultation during the open enrollment period. Fifty-nine percent of single participants received no help from financial planners or peers, while 34% of married employees did not consult their spouses. For single employees, nearly 40% (38%) waited until right before the enrollment deadline to make benefits decisions. Respondents reported spending more time planning a vacation (28%), doing their taxes (24%), and shopping for a new car (16%) than making open enrollment decisions (13%). The figures were even lower for single participants, who reported spending more time making a new major appliance purchase (17%) than choosing their benefits during open enrollment (2%). Question: Should you really spend more time planning for a one or two week vacation than for a retirement that can last 20- 30 years? Question: Should you really spend more time shopping for a new car that you will replace in three - four years than for a vehicle that will have to carry you through your entire retirement? Question: Should you really spend more time picking out a dishwasher that you use one hour a day than for a next egg that will keep you from taking on a job as a dishwasher to enhance your retirement income? “ You cannot build a reputation on what you are going to do.” Henry Ford 1863 – 1947, founder of the Ford Motor Company Sandy The Smart Saver : Alternative Investments? Be Careful!!!!! Hi, I’m Sandy The Smart Saver and I am here once again to give you some tips on Planning-Saving- Investing For Retirement and I am still taking a light- hearted approach and still trying to make the whole saving-investing for retirement process a “fun” event. And of course, I am still not your average squirrel. By now, you know that I’m a little “nuts” about investing. I guess most of my inquisitive nature comes from my Mom --- Josephine. At the last meeting of our “Us Squirrels Ultimate Investment Club,” we engaged in one of our regular conversations --- how do we increase the rate of return on our investments. My brother Albert (the speculator) said we should be investing in real estate. “My sources tell me that there is no bubble; prices are going to continue to explode.” Mom then told Albert, “Son, if we invest in real estate now, the only thing that is going to explode to smithereens is our nest egg. Any more dumb suggestions?” Cousin Elvis (the wannabee millionaire) said, “I just looked at an article in a financial magazine where it quoted a guy who serves high net worth investors and he said that by employing what was once considered an ‘unorthodox investment management model that Planning - Saving - Investing For Retirement Sandy Says: Retire From Retirement?

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- 7 - included exposure to alternative investments like hedge funds, Harvard has routinely outperformed the vast majority of its university peers as well as many asset management companies.’ So, my question to you President Josephine, is why can’t the Harvard approach work for us.” Mom then told Elvis, “I saw the same article and I got so agitated that I had to take a couple of tranquilizers. First off, do you know what Jack Meyer, the manager of the Harvard Endowment Fund has to say about the investment industry? Let me read to you his remarks --- “Most people think they can find managers who can outperform the market but most people are wrong. Eighty- five to 90% of managers fail to match their benchmarks. Because managers have fees and incur transactions costs, you know that in the aggregate they are deleting value. The investment business is a giant scam.” Cousin Elvis said, “A scam?’. I didn’t know that.” Mom continued ---- “Did you know that Forbes magazine in their profile of America’s richest money managers states that one of people at the top of the list is a hedge fund manager worth $2.7 billion. Did you know that his fund has gained 34% annually since 1988?” Elvis said, “I didn’t know that. That’s good. We should be getting a piece of that action.” Mom continued --- “But, did you know that he charges the most expensive fees --- a whopping 44% of profits and 5% of assets each year and if you invest in his hedge fund, you would get an annualized return of 13% --- basically the same return you would get from investing in the S&P 500 Index Fund and with a lot less risk.” Elvis said, “I didn’t know that.” Mom continued --- “And Elvis, did you know that Long Term Capital Management hedge fund lost $4.6 billion and folded in 1998 and to avoid the threat of a systemic crisis in the world financial system, the Federal Reserve had to put together a $3.5 billion rescue package from leading U.S. investment and commercial banks.” Cousin Elvis said, “I didn’t know that.” Mom continued ----“So, my question to you Elvis is ----Why do you want to make some of America’s richest money managers even richer when they are using your money to finance a risky proposition.” Cousin Elvis said, “I didn’t know that.” Mom continued --- “Sandy, please give me another tranquilizer. Elvis, there’s a lot you don’t know about investing but try to stay with the program. And by way Elvis, here’s eight words of wisdom for you --- Don’t be taken by pitches for instant riches.” “ Since I’ve been investing, the technology and instruments have changed enormously. But much of what our financial services institutions deliver to Main Street still, well, sucks. Sandy Cartoon: Camille: Kids today are so smart. Sandy: Why do you say that? Camille: I was teaching math in my class the other day and I was talking about percentages and interest rates. I then asked the question ---- If you put $10,000 in a bank for one year at 5 percent interest, what do you get. One kid yelled out, A toaster. Sandy: Smart Kid! Wall Street investment products suck because it’s all about them and their revenue today. It’s not about us and our income tomorrow.” Scott Burns, Dallas News Financial Columnist Quick Take #1: Do Top Performing Mutual Funds Continue To Be Top Performing Mutual Funds? Standard & Poor, a provider of independent credit ratings, indices, risk evaluation, investment research, data, and valuations, released their Mutual Fund Performance Scorecard in the summer of 2005. It measured the consistency of the top performing mutual funds over three and five consecutive years. As of 5/2005, only 10.7% of large-cap funds, 9.2% of mid-cap funds, and 11.5% of small-cap funds maintained a top-quartile ranking for three consecutive years. What they found is that only one in every 10 top-performing funds in a given year stays in the top 25% for the next two. What are the odds of a superior fund remaining a superior fund over a longer period of time? Even worse. The MotleyFool.com states that “With more mutual funds than publicly traded stocks available for your hard-earned investment dollars, this is actually not all that surprising. Even less surprising is the fact that the most consistently top-performing funds had common characteristics.” According to the S&P, repeat top performers had: longer manager tenures at their funds. The average U.S. domestic stock fund has an average, manager tenure of 4.6 years. Lower expense ratios relative to their peers. The average expense ratio of U.S. funds is 1.53%. Protected downside : According to the S&P, &quot;While winners did better in the bull market rebound, the consistent winners also minimized or avoided losses during the bear market.&quot; Winners, in short, stuck to their strategic guns in good times and bad. The S&P's study is a wonderful reminder that many -- too many, sadly -- mutual funds don't make the cut. If you want to see what happened to the Mutual Fund

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Winners of 2004 in the past year, all you have to do is to look at the 2005 final report. Most, if not all, of 2004’s winners, will not be on the Top Dog list of 2005. It happens every year. “ There is no quick road to riches. And if someone promises you a path to overnight riches, cover your ears and close your pocketbook. If an investment idea sounds too good to be true, it is too good to be true.” Burton Malkiel, Professor of Economics at Princeton University, The Random Walk Guide To Investing Quick Take #2: Take Your Social Security Benefits At 70? For years, a good number of the experts have suggested that if you are eligible, you should start collecting your benefits early. However, some are now saying that given that half of the 65-year-olds alive today will likely live beyond age 83, outliving one's assets is an all-too-likely possibility for some retirees. Delaying Social Security benefits helps to offset that risk. Today, about two-thirds of those eligible for Social Security, collect their benefits early, but a good number of planners now say that can be the wrong choice. Given that half of the 65-year-olds alive today will likely live beyond age 83, outliving one's assets is an all-too-likely possibility for some retirees. Delaying Social Security benefits helps to offset that risk. If you wait until age 70, that will be the age at which beneficiaries collect the highest monthly benefit possible. Taking benefits early, on the other hand, permanently reduces your monthly amount. Christine Fahlund, a senior financial planner with T. Rowe Price, in Baltimore, Md., states, “This is an alternative you may not have considered because planners for a long time have been saying 'why would you want to wait? One of the advantages of waiting all the way to age 70 is that the starting monthly benefit is the largest starting amount the government will ever pay you,” Fahlund is not recommending that everybody do it but &quot;if longevity is an issue in your family, this could be one solution that you want to look at.&quot; Others agree. &quot;Most advisers recommend taking benefits earlier. We think that type of thinking needs to be revisited,&quot; said Jim Mahaney, marketing director for lifetime income solutions at Prudential Retirement. Every year you delay past your full retirement age - which is somewhere between 65 and 67, depending on your birthday - your benefit rises 6% to 8%. That means a retiree born in 1943 who's eligible to collect, say, $960 a month in benefits if retiring at 62 would get $1,281 a month at 66, the full retirement age. - 8 - But that person would collect $1,690 per month by waiting until age 70, an 8% annual increase for the four years from full retirement age to 70, according to the SSA. Using those dollar amounts, age 80 is the &quot;break-even&quot; age - when delaying retirement brings a higher total benefit than retiring at 62. Delaying benefits doesn't make sense for everybody. Some need the monthly income to survive, while those in poor health or with a family history of shorter life spans, are probably better off taking the money early. For others, the psychological benefit of getting the money as soon as possible - no matter the financial consequences - is the key driver. “ If you take too long deciding what to do with your life, you’ll find out you’ve done it.” George Bernard Shaw 1856 – 1950, Irish dramatist, literary critic, socialist spokesman Quick Take #3: Employer Provided Health Care Benefits In Retirement Will you have them? Unfortunately, fewer and fewer employees will be able to count on this benefit. And even if you will, you will have to pay more money toward premiums, co-payments and other services, according to a report issued by the Employee Benefit Research Institute, a nonpartisan think tank in Washington. What did the study find? The percentage of private-sector employers offering retiree health benefits to early retirees, those under age 65, has declined from 22 percent in 1997 to just 13 percent in 2002, the latest year for which figures are available. And the percentage of employers offering retiree health benefits to &quot;Medicare-eligible&quot; retirees, those age 65 or older, has declined from 20 percent in 1997 to 13 percent. What does this mean for future retirees? Paul Fronstin, author of the EBRI report, states that they will be in for quite a shock come retirement. &quot;As current trends continue, and workers come to understand the true availability and cost of retiree health benefits, baby boomers may find themselves unpleasantly surprised by what awaits them in retirement.” Fidelity Investments estimated that a couple retiring in 2004 without an employer-sponsored health-care plan would have needed to set aside $175,000 to pay future health-care costs.

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- 9 - For additional information or if you have any questions, contact, Robert R. Julian, Retirement Planning Consultants, 313 Blackstone Avenue, Ithaca, New York 14850, (607) 255-4405, email: rrj1cornell.edu. Visit our website at retirementplanningconsultants.com Retirement Planning Consultants provides a number of resources designed to help individuals make informed decisions on planning – saving – investing for retirement. We offer unbiased and easy-to-understand information from an impartial outside source. We’ve been doing that for almost 30 years. Our “Planning – Saving – Investing For Retirement” workshops have helped thousands of individuals. This newsletter intends to present factual up-to-date, researched information on the topics presented. We cannot make any representation regarding the accuracy of the content or its applicability to your situation. Before any action is taken based upon this information, it is essential that you obtain competent, individual advice from an attorney, accountant, tax adviser or other professional adviser. Information throughout this newsletter, whether stock quotes, charts, articles, or any other statements regarding market or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. No party assumes liability for any loss or damage resulting from errors or omissions based on or use of this material. <ul><li>Quotable Quotes </li></ul><ul><li>The probable is what usually happens. Aristotle 384 – 322 BC, ancient Greek philosopher and one of the most influential philosophers in Western thought. </li></ul><ul><li>The stock market is a very expensive place to find out who you are. Wall Street Quote </li></ul><ul><li>The question that is so clearly in many potential parents’ minds: Why should we stunt our ambitions and impoverish our lives in order to be insulted and looked down upon in our old age. Joseph Schumpeter 1883 – 1950, Austrian –American economist </li></ul><ul><li>Why not invest your assets in the companies you really like? As Mae West said, &quot;Too much of a good thing can be wonderful&quot;. Warren Buffett, legendary investor </li></ul><ul><li>Much learning does not teach understanding - Hearclitus, 540 BC – 480 BC. Greek Philosopher </li></ul><ul><li>Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. Franklin D. Roosevelt 1882 – 1945, thirty-second President of the United States </li></ul>Stock Market – Investment Humor A brokerage firm recently opened up an office near a cemetery and in the window posted a sign ---- You can’t take it with you when you go, but here’s a chance to be near it.”